QIAGEN N.V.

Annual Report 1996

1.00

7474

05/

97

QIAGEN believes that it is the world's leading provider of innovative enabling technologies and

products for separating and purifying DNA and RNA — the genetic blueprints of life. Since 1986,

QIAGEN has developed and marketed a broad range of proprietary products for academic,

industrial, and clinical research. The rapidly increasing understanding of the structure and function of

DNA and RNA continues to expand the use of DNA and RNA in developing commercial markets such

as DNA sequencing for genomics and drug development, DNA-based clinical diagnostics, and gene

therapy and genetic vaccination. These exciting new markets share a crucial need — the need for

purified DNA and RNA. With its expertise in DNA and RNA purification, broad technology portfolio,

and leading position in the research market, QIAGEN is developing specialized new products for the

numerous participants in each of these developing markets, further diversifying its opportunities for

continued growth and success.

Earnings per Share

3-Year CAGR: 87%

US$

per

sha

re

1991 1992 1993 1994 19950.00

0.04

0.08

0.12

0.16

0.20

1996

0.24

0.28

0.32

0.36

0.40

Net Income

3-Year CAGR: 104%

0

1,000

2,000

3,000

in U

S$ th

ousa

nds

1991 1992 1993 1994 1995 1996

4,000

5,000

6,000

7,000

1

Financial Highlights

Net Sales

0

10,000

20,000

30,000

40,000

50,000

in U

S$ th

ousa

nds

1991 1992 1993 1994 1995 1996

60,000

3-Year CAGR: 50%

70,000

"We love your products" are words that every Chairman and CEO love

to hear. At QIAGEN we hear them many times a day.

When QIAGEN was founded 11 years ago, our goal was to use a

simple new technology to replace the slow, toxic, traditional methods

used for plasmid DNA purification — the first step in almost all molecular

biology applications. QIAGEN was at the forefront of recognizing

and responding to the need for kit-based systems for DNA and RNA

purification. By developing a broad range of technologies from which

to generate innovative products to satisfy these under-served needs, QIAGEN was in the vanguard of a new

market segment that now forms a major part of the growing molecular biology marketplace. Today,

QIAGEN offers scientists a comprehensive portfolio of over 250 products and services for DNA, RNA, and

protein purification, DNA amplification, DNA sequencing, transfection, and laboratory automation.

QIAGEN has built a leading position in the molecular biology research market and enjoys excellent brand

recognition, a strong reputation for quality, and enthusiastic customer acceptance and loyalty. Our products

are backed by first-class customer service and support through frequent contact with an international network

of product managers, highly trained technical support specialists, and knowledgeable sales personnel, most

of whom have a Ph.D. in one of the life sciences. Maintaining this close relationship with our customers is

one of QIAGEN’s highest priorities and one of our greatest strengths.

QIAGEN is not a one product – one technology – one hit company. Our strategy is to provide customers with

complete solutions by offering them a broad and growing range of products. For example, recently introduced

products for PCR and transfection are targeted at both new and existing DNA and RNA purification customers

in the research market. In addition, our close relationship with customers helps QIAGEN stay abreast of new

technology developments, and provides a wealth of information about new market needs and opportunities.

Using this information and our broad range of technologies to rapidly develop well-suited products for the

market is key to QIAGEN's continued growth and success.

QIAGEN believes its core biotechnology research market is growing rapidly and financial support for basic

research in the life sciences is increasing. Additionally, we believe many biotech and pharmaceutical

companies are shifting their focus towards genetic research to develop new diagnostics and therapeutics,

meaning that money invested in these companies is increasingly being spent on DNA and RNA purification.

While we continue to focus on QIAGEN’s core business and customers in the research market, our strategy

is to leverage our leading position in this market in order to become a leader in the developing commercial

Dr. Metin Colpan

To Our Shareholders

3

markets for DNA and RNA purification — genomics and drug development, clinical diagnostics, and gene

therapy and genetic vaccination. QIAGEN will strive to expand in these new markets in the same step-by-

step way that we have grown in the research market — by closely monitoring our customer's requirements

and developing the products and tools they need to be successful. Continually creating innovative new

products and technologies is, and will continue to be, QIAGEN’s main goal.

By successfully completing an initial public offering on June 28, 1996, we responded to another frequent

customer comment — "When will QIAGEN go public?" QIAGEN shares are traded on The Nasdaq Stock

Market in the United States under the symbol QGENF, and additionally on the German OTC markets. The

$31 million in proceeds from our IPO will primarily be used to; establish a new production and research and

development facility in the United States, our largest marketplace; to invest in new technologies to develop

additional innovative products; to expand our sales and marketing efforts; and to further enhance our

customer services.

QIAGEN reported $54.2 million in revenues and $5.3 million in net income for 1996, representing growth

over 1995 of 46% and 123% respectively. Earnings per share in 1996 increased 94% to $0.35 on

15,410,000 weighted average shares outstanding. Cash and marketable securities at December 31, 1996

totaled $30.1 million, mainly resulting from our initial public offering. All financial statements in this annual

report have been approved by the auditors and our Supervisory Board.

QIAGEN's success is a result of our commitment to continually provide innovative solutions to our customers

and support them with the best quality products and service available. We would like to thank QIAGEN’s

more than 500 employees for their contribution to this achievement. Their commitment to QIAGEN's growth

and their dedication to our customers means that we continue to capture market share as researchers convert

from traditional methods to QIAGEN products. It is the experience and drive of this multinational team of bright

and enthusiastic people that allows us to innovate, serve our customers, and rapidly expand our business.

QIAGEN will continually strive to optimize and diversify its opportunities for success by providing the tools

for the genetic gold rush. When our customers succeed, so does QIAGEN.

Thank you for your interest in QIAGEN. We look forward to reporting our future successes.

(signature)Dr. Metin ColpanChief Executive Officer

(signature)Prof. Dr. jur. Carsten P. ClaussenChairman of the Supervisory Board

What are DNA and RNA?

DNA and RNA are the fundamental regulatory moleculesof life. They are the building blocks of a genetic blueprintwhich contains and conveys all the individual geneticinformation in a cell. Since DNA and RNA regulateevery chemical and biological process in an organism,from protein synthesis to cell reproduction,defects or alterations in their structure canlead to disorders and disease.

QIAGEN's innovative technologies

provide researchers with a wide range of

rapid, reliable, user-friendly products for

DNA and RNA purification. Each product

is customized to target common customer

applications and has the components neces-

sary to enable users to quickly and easily

acheive the results they need.

Recent major advances in understanding DNA

and RNA structure and function and their criti-

cal role in the disease process are revolutioniz-

ing disease research, diagnosis, and treatment.

Technologies such as rapid DNA sequencing

and the polymerase chain reaction (PCR),

which allows almost undetectable amounts of

DNA and RNA to be rapidly amplified into sig-

nificant quantities, have created new DNA- and

RNA-based commercial markets in the areas of:

● DNA sequencing and genomics for drug

development

● DNA- and RNA-based clinical diagnostics

for infectious and genetic diseases

● Genetic vaccination and gene therapy

These emerging markets share a critical need

for rapid and efficient purification of DNA and

RNA to ensure reliable, reproducible results.

Academic, industrial, and clinical research

customers need highly purified DNA and RNA

on a daily basis. No matter what the applica-

tion, DNA or RNA must be isolated from sam-

ples in the purity required for the next stage in

the procedure, such as sequencing, PCR, or

detection and analysis. Traditional methods for

purifying DNA and RNA are time-consuming,

labor-intensive, require hazardous reagents

and expensive equipment, and cannot be guar-

anteed to produce reliable and reproducible

results. They are generally unsuitable for high-

speed processing or for large numbers of sam-

ples, and require considerable technical skill.

QIAGEN’s proprietary technologies make it

faster and easier to purify DNA and RNA than

ever before and we are constantly striving to

provide innovative new technologies and prod-

ucts to serve the evolving needs of our

customers.

We believe that as scientific knowledge about

DNA- and RNA-controlled processes increases,

new applications and markets in medicine,

agriculture, forensics, waste control, and food

processing will develop and that the need for

QIAGEN products, technologies, and services

will grow with them.

5

The Need for

Purified DNA & RNA

7

QIAGEN’s DNA and RNA purification

technologies and products are widely used

throughout the world. The introduction of the first

QIAGEN Plasmid DNA Purification Kit 10 years

ago revolutionized the molecular biology

research market by providing researchers with an

alternative to the slow, difficult, and hazardous

traditional purification methods. QIAGEN's safe,

user-friendly kits and expert technical service

dramatically increased the speed, convenience,

and reliability of DNA

purification procedures.

The resulting word-of-

mouth recommendations

from researchers about the

benefits and quality of our

products helped QIAGEN

to build its leading position

and excellent reputation.

Researchers need to purify DNA and RNA from a

wide variety of sources for a growing variety of

applications. They also need products to work with

the purified DNA and RNA in the next step of their

research — amplifying it, or transferring it into

another cell, or turning it into a protein and then

detecting and purifying that protein. A broad

proprietary-technology platform has allowed

QIAGEN to develop over 250 products for the

specific needs of these researchers. Whether the

need is purity, speed, yield, reliability, sample

throughput, ease of use, or all of the above,

QIAGEN’s technology base allows us to develop

well-suited products.

QIAGEN’s strategy is to provide customers with

complete solutions for their DNA- and RNA-related

research needs by offering them an increasingly

broad range of products. For example, in 1996

QIAGEN expanded its product portfolio by

adding PCR reagents for DNA amplification to

complement its existing products for purifying

DNA before and after PCR amplification.

Similarly, the recent addition of a novel QIAGEN

transfection reagent — SuperFect™, a delivery

system for gene transfer into

cells — offers researchers

already using QIAGEN

Plasmid Kits an integrated

solution for the next stage in

their research.

QIAGEN believes that it is

the technology leader in

this growing research market and that it is

well-positioned for further market penetration.

Based on estimates of the number of sample

preparations being performed each year,

QIAGEN believes that the current worldwide

research market for its products exceeds $600

million annually. We believe that we are well

positioned to increase sales and expand our share

of the research market as laboratories convert from

traditional methods to QIAGEN products.

QIAGEN — Experts in DNA and RNA Purification for

Research

9

Our close relationship with research customers is,

and will continue to be, integral to our success. An

international network of product managers,

highly-trained technical support specialists, and

knowledgeable sales representatives are in daily

contact with our customer base, providing

excellent service and support. This constant

interaction allows QIAGEN to keep abreast of the

evolving needs of the market and react rapidly to

new trends and technologies as they develop. As

the research market is the breeding ground for

new technologies and applications, our position

in this fertile market provides us with the oppurtunity

for early entry into the new markets developing

out of it. Moreover, as researchers move their

expertise into industry and establish new

commercial markets, we believe they will take their

close relationship with QIAGEN with them.

QIAGEN — Experts in DNA and RNA Purification for

Research

11

QIAGEN — Experts in DNA and RNA Purification for

GenomicsQIAGEN believes it has successfully leveraged its

leadership in the research market into a strong

position in the emerging genomics market.

Genomics is a revolutionary new science based

on DNA sequencing that seeks to understand life

at its fundamental genetic level. The world-wide

cooperative attempt to sequence all 3 billion

building blocks of DNA in a

human cell — the Human

Genome Project — will

radically change our under-

standing of diseases and

the practice of medicine.

Unraveling the genetic

mechanisms of disease

opens the way for DNA-

based drug screening to develop more specific

drugs with reduced side effects, designed to target

the cause of disease rather than the symptoms.

Genomics requires high-throughput DNA

purification for DNA sequencing and functional

analysis of genes. Reliable purification methods

are essential, as DNA sequencing is a costly

process that depends on DNA purity for high-

quality, reproducible results. QIAGEN offers

genomics customers a wide range of DNA

purification products designed to suit their

individual requirements for speed, purity, and

throughput. QIAGEN works closely with its

genomics partners, participates in the European

Yeast Genome Project, and offers a custom

sequencing service for large-scale genomics

projects. This ongoing involvement allows

QIAGEN to maintain a high level of sequencing

expertise and stay at the forefront of new

technology developments.

In response to customer requests for automated

DNA purification, QIAGEN developed the

BioRobot 96OO — a benchtop workstation

which automates QIAGEN

purification technologies.

We believe this automated

system provides us with a

strong competitive position in

the high-throughput genomics

market. The adaptation of

QIAGEN’s RNA purification

and post-PCR DNA purifi-

cation products for use on the BioRobot 96OO

will help customers towards a complete genomics

solution, from DNA preparation for sequencing

and functional analysis to RNA purification for

drug screening and target validation.

QIAGEN genomics customers can be found in

many of the hundreds of laboratories participating

in the Human Genome Project, academic

institutions, the National Institutes of Health, and

pharmaceutical and genomics companies around

the world.

13

Since 1992, QIAGEN has focused its research

and development and marketing efforts on DNA

and RNA purification products for the developing

clinical research and diagnostics markets. Today,

QIAGEN’s systems for DNA or RNA preparation

are widely used in these growing markets.

DNA- and RNA-based clinical diagnostics for

infectious and genetic diseases are far more

specific and far more sensitive than traditional

immunoassay diagnostics. By recognizing specific

DNA or RNA segments, PCR and other techniques

which amplify DNA and RNA, rapidly detect and

identify even minute amounts of viruses, bacteria,

or cancer cells. For example, while standard

immunoassay tests to screen the blood supply for

HIV and other infectious agents are effective only

weeks after infection, and serological tests for tissue

typing or identification of pathogens can take days

or weeks, DNA- and RNA-based tests can detect

infected blood, quantitate the level of infection, and

identify specific pathogens in just hours.

The first step in DNA- and RNA-based testing is

purification of the DNA or RNA. Establishment of

these tests requires standardized, reliable DNA and

RNA purification systems that stabilize clinical

samples during collection, storage, and transport;

inactivate infectious agents; quantitatively purify

DNA and RNA from a wide variety of samples,

free of components which inhibit amplification or

detection; and provide cross-contamination-free

automation and high-throughput processing.

QIAGEN’s technology platform and purification

expertise have created products to satisfy most of

these needs. Several million QIAamp® and

RNeasy® preparations have already been sold to

clinical research and clinical diagnostics

customers, establishing QIAGEN purification

technologies in the emerging clinical diagnostics

market. QIAGEN also has a pipeline of new

technologies and products in development. For

example, in 1996 QIAGEN acquired the rights to

cationic detergent technology for stabilization and

purification of DNA and RNA. This new technology

can be used alone or in combination with

QIAGEN’s existing purification technologies to

provide clinical customers with a system for DNA

and RNA sample preparation — from collection

and stabilization of samples to DNA and RNA

purification.

QIAGEN’s strategy is to leverage its leadership in

the research market to become the major supplier

of DNA and RNA purification products to clinical

diagnostics labs and companies. QIAGEN seeks

to combine its sample preparation systems with

existing DNA- and RNA-based diagnostic tests,

thereby providing truly comprehensive clinical

diagnostic solutions. We believe once a complete

solution is available — from sample collection to

result analysis — the DNA- and RNA-based clinical

diagnostics market will grow and develop rapidly.

QIAGEN’s goal is to take advantage of the

increasing opportunities in this developing market.

QIAGEN — Experts in DNA and RNA Purification for

Clinical Diagnostics

15

Many scientists believe that identification of the

genes and gene mutations responsible for many

common diseases and disorders will lead to the

development of DNA-based drugs and therapies.

DNA-based drugs could be genes designed to

prevent or cure disease or act as therapeutics by

mimicking the biological function of healthy genes.

Since DNA-based drugs would address the root

cause of disease, they should be more specific and

effective, cause fewer side effects, and offer hope

for diseases that currently have no treatment.

QIAGEN offers pharmaceutical and biotechnology

companies large-scale purification and process

technologies for the developement of DNA-based

genetic drugs and vaccines. We currently provide

certified cGMP production of up to 25g of plasmid

DNA to carry out phase I and II clinical trials, and

are working with customers to obtain regulatory

approval for the purification stage of the overall

clinical procedure.

Genetic vaccines also offer the potential for an

exciting new market. Recent studies indicate that

vaccinations against disease using DNA or RNA

fragments from a disease-causing organism may

be more effective than conventional vaccines

using recombinant proteins or inactivated infectious

agents. In particular, DNA-based vaccines have

been shown to induce immunity in subjects who

typically show no immune response to traditional

vaccines. Since DNA-based vaccines would also

be less temperature-sensitive than traditional

vaccines, they may be a useful tool for fighting

disease in underdeveloped countries.

In both gene therapy and genetic vaccination, the

DNA itself is the drug introduced into the body.

Since even trace contaminants can cause toxic

reactions, the purity of the DNA preparation is

critical. Commercialization of DNA-based drugs

and vaccines will depend largely on the availability

of approved purification and process technologies

that can consistently and reliably provide large

amounts of ultrapure, endotoxin-free DNA.

QIAGEN’s expertise and technology platform has

allowed it to develop and provide purification and

process technologies for numerous pharmaceutical

and biotechnology companies, and to work with

its customers to gain the required regulatory

approvals. Once a company’s DNA-based genetic

vaccination or gene therapy procedure is

approved by the licensing authorities, QIAGEN's

goal is to transfer the approved process technology

to the company and become a long-term supplier

of technologies and consumables for their

purification requirements.

Gene Therapy andGenetic Vaccination

QIAGEN — Experts in DNA and RNA Purification for

QIAGEN’s Key Strengths● A broad range of technologies for DNA and RNA purification

● Worldwide leadership in the research market

● A reputation for high-quality products backed by superiorservice and support

● Strong brand recognition and customer acceptance

● Close customer relationships and early exposure tonew trends and markets

● Significant opportunities in new commercialmarkets based on DNA and RNA

● A multinational team of over 500 highly-trained and motivated employeescommitted to growth and success Genomics

ResearchMarket

ClinicalDiagnostics

GeneTherapy

17

QIAGEN continues to invest significant resources

in research and development in order to maintain

and enhance its technology leadership. We

believe the competitive advantages offered by our

innovative products and technologies for the

separation and purification of DNA and RNA will

allow us to continue to increase our share of our

traditional research market and the markets

emerging from it. We also continually strive to

develop or acquire complementary technologies

as a means to leverage the market potential of our

existing technologies.

QIAGEN will strive to penetrate

and grow in these new markets

in the same way that we have

grown in our core research

market — by listening to our

customers and drawing on

our expertise and proprietary

technologies to develop products

for their needs. Our goal is to

provide customers with complete solutions for their

work with DNA and RNA. Since QIAGEN began

providing innovative DNA and RNA purification

products in 1986, our expertise and technology

platform have expanded to cover many other

applications for DNA and RNA, from clinical

sample collection and stabilization to transfer of

genes into new cells.

QIAGEN’s success is due to the commitment of a

multinational team of more than 500 highly-

motivated employees, dedicated to providing

customers with innovative, high-quality products

and exceptional service by phone, fax, e-mail,

and in person. QIAGEN provides this hands-on,

direct customer support through an international

team of over 80 sales representatives in the

United States, Germany, France, the United

Kingdom, Switzerland, and Australia. In addition,

specialized distributors assist QIAGEN customers

in more than 25 other countries around the world.

This ongoing communication helps QIAGEN to

identify customer needs and product requirements,

promote customer satisfaction and loyalty, and

gain insight into scientific

research and related commer-

cial opportunities. The high

quality of the products and

associated service allows

QIAGEN to confidently offer

its quality guarantee on, and

to command a premium price

for, its products.

The new DNA- and RNA-based markets devel-

oping out of the research market need enabling

technologies for DNA and RNA purification and

handling. We hope to seize the opportunities

present in these emerging markets. Every time one

of our many customers succeed, we succeed.

The future looks bright for QIAGEN.

Broad Market OpportunitiesQIAGEN — An International Company with

Summary Consolidated Financial Data(amounts in thousands, except per share data)

Year ended December 31,1992 1993 1994 1995 1996

(unaudited)

Consolidated Statement of Income Data:Net sales $11,428 $16,524 $24,115 $36,992 $54,157

Cost of sales 4,067 5,336 7,288 9,550 14,669

Gross profit 7,361 11,188 16,827 27,442 39,488Operating expenses

Research and development 1,639 2,356 2,758 4,414 6,490Sales and marketing 1,542 3,352 5,323 9,369 16,034General and administrative 4,471 4,488 5,281 8,981 10,985

Total operating expenses 7,652 10,196 13,362 22,764 33,509

Income (loss) from operations (291) 992 3,465 4,678 5,979

Other income (expense), net 427 625 (525) (153) 2,682

Income before provision for income taxes 136 1,617 2,940 4,525 8,661

Provision for income taxes 81 897 1,656 2,130 3,331

Net income $ 55 $ 720 $ 1,284 $ 2,395 $ 5,330

Net income per common and commonequivalent share (1) $ 0.00 $ 0.06 $ 0.10 $ 0.18 $ 0.35

Weighted average number of common and common equivalent shares outstanding 12,886 12,886 13,132 13,623 15,410

December 31,1992 1993 1994 1995 1996

(unaudited)

Consolidated Balance Sheet Data:Cash and cash equivalents $ 803 $ 446 $ 3,612 $ 5,305 $ 1,975Working capital 4,083 4,725 8,303 9,920 35,829Total assets 12,565 14,820 19,450 26,203 66,190Total long-term liabilities, including current portion 4,614 6,791 7,279 7,800 7,108Total shareholders' equity 5,504 5,685 9,120 12,208 47,696

(1) Computed on the basis described for net income per Common Share in Note 2 of the Notes to Consolidated Financial Statements.

18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section contains a number of forward-looking statements. These statements are based on current expectation and actualresults may differ materially. Among the factors which could cause actual results to vary are those described in "Business Factors" below.

Overview

QIAGEN believes that it is the world's leading provider of innovative enabling technologies and products for theseparation and purification of nucleic acids. The Company was established to develop, manufacture and market aportfolio of proprietary technologies and products to address these needs, which include purity, speed, yield,reliability, throughput and ease of use. QIAGEN's products enable customers to reliably and rapidly produce highpurity nucleic acids without using hazardous reagents or expensive equipment. QIAGEN offers over 250 products,including a broad range of consumables, as well as instruments and services, for a variety of applications in nucleicacid separation and purification.

The Company has experienced significant growth in the past, and since 1993 has had compound annual growth ofapproximately 49% in sales and 95% in net income. In 1996, the Company recorded $5.3 million of net incomeand $54.2 million of net sales, and has to date funded its growth through internally generated funds, debt, anaggregate of $9.5 million from the private sale of equity and through proceeds from the sale of securities to the public.

Results of Operations

The following table sets forth certain income and expense items as a percentage of net sales for the periods indicated:

Year ended December 31,

1994 1995 1996

Net sales 100.0% 100.0% 100.0%Cost of sales 30.2 25.8 27.1Gross profit 69.8 74.2 72.9Operating expenses:

Research and development 11.4 11.9 12.0Sales and marketing 22.1 25.3 29.6General and administrative 21.9 24.3 20.3

Total operating expenses 55.4 61.5 61.9Income from operations 14.4 12.7 11.0Other income (expense): (2.2) (0.4) 5.0Income before provision for income taxes 12.2 12.3 16.0Provision for income taxes 6.9 5.8 6.2

Net income 5.3% 6.5% 9.8%

19

20

Fiscal Years Ended December 31, 1996 and 1995

Net Sales. Net sales increased 46% (or $17.2 million) to $54.2 million in 1996 from $37.0 million in 1995. Net salesin the United States were $31.6 million in fiscal 1996 or 50% above the net sales in the United States in thecomparable period of 1995 ($21.0 million). The overall increase in net sales was primarily attributable to increasedmarket penetration of QIAGEN’s existing and new products. Net sales outside the United States were $22.6 millionin fiscal 1996 or 41% above the net sales outside the United States in the comparable period of 1995 ($16.0 million).A material portion of the Company's sales continue to be attributable to the Company's range of products designedfor plasmid DNA applications.

Changes in exchange rates affected the growth rate of net sales from 1995 to 1996. Net sales outside the UnitedStates are exposed to currency fluctuations, since they are mainly denominated in German marks and to a lesserextent in British pounds, French francs, Swiss francs, Australian dollars as well as other currencies. Compared to1995, in 1996 the US dollar as measured in the average exchange rate for the year, appreciated against the threemost significant currencies affecting the Company's net sales. If the same rates would have been used for 1996 ashad been applied for 1995, net sales for 1996 would have been higher and the growth of net sales would haveexceeded the percentage calculated on reported net sales.

Gross Profit. The Company's gross profit increased from $27.4 million (74% of net sales) in 1995 to $39.5 million(73% of net sales) in 1996. The absolute dollar increase in gross profit was primarily due to increased unit sales. In1996, the Company continued to increase its production capacity by adding personnel, automated equipment, andproduction and warehouse space, in order to accommodate its expanding sales. This expansion in production capacityresulted in an increased asset base in production and a decrease in gross profit margin. The Company believes thatthe expansion in its production capacity will increase its production efficiency in the future. In addition, during 1996the Company experienced strong growth in net sales from its instrumentation products such as the QIAGEN BioRobot.These products carry a slightly lower gross margin than the Company's consumable products.

Research and Development. Research and development expenses increased 47% from $4.4 million (12% of net sales)in 1995 to $6.5 million (12% of net sales) in 1996. The increase resulted primarily from greater personnel expenses,as the Company continued the expansion of its new product development capabilities. The Company has a strongcommitment to research and development and expects its expenses in this area to continue to increase significantly.

Sales and Marketing. Sales and marketing expenses increased 71% from $9.4 million (25% of net sales) in 1995 to$16.0 million (30% of net sales) in 1996. The increase was associated with increased volume in net sales, includingexpenditures for additional personnel, commissions, promotions, publications and advertising. A portion of theseexpenses were also associated with the establishment of marketing and sales subsidiaries in Australia and France. In1996, the Company also launched a range of new products, including the PCR product line, that it supported withmarketing efforts that increased expenses in marketing and sales.

General and Administrative. General and administrative expenses increased 22% from $9.0 million (24% of net sales)in 1995 to $11.0 million (20% of net sales) in 1996. The increase was due to the expansion of the Company'sadministrative infrastructure to accommodate sales growth. A significant portion of the increase, was incurred inconnection with the addition of Australian and French sales subsidiaries.

Other Income (Expense). Other income (expense) increased from a net expense of $153,000 in 1995 to a net incomeof $2.7 million in 1996. The largest component of this increase was attributable to gain on foreign currency transactionsof $1.0 million in 1996 compared to a loss of $0.6 million in 1995. Income from foreign currency transactions reflectsnet effects from conducting business in currencies other than the US dollar. QIAGEN N.V.’s functional currency is theU.S. dollar and its subsidiaries functional currencies are the German mark, the British pound, the Swiss franc, theFrench franc or the Australian dollar. In 1996, the value of the U.S. dollar increased against these currencies, includingthe German mark in which a significant amount of the Company’s consolidated business is conducted. While thisincrease in value of the U.S. dollar had a negative effect on net sales translated from German marks into U.S. dollars,

the Company recorded income from foreign currency transactions and liabilities denominated in currencies other thanthe U.S. dollar, mainly the German mark.

This increase in other income in 1996 was also due to increases in interest income and research and developmentgrant income, offset by an increase in other income (expense). Interest income in 1996 increased to $1.0 million from$76,000 in 1995. This increase reflects interest received during 1996 on the proceeds from the Company’s initialpublic offering completed on June 27, 1996. Research and development grant income in 1996 increased 69% or$549,000 to $1.3 million from $790,000 in 1995. QIAGEN's research and development activities are currentlyprincipally carried out in Germany, and the Company expects to continue to apply for such research and developmentgrants in the future. A significant portion of this increase in grant income is related to increases in the Company'sresearch and development expenses. Other income (expense), net decreased from income of $247,000 in 1995 toan expense of $88,000 in 1996.

Provision for Income Taxes. The Company's effective tax rate decreased from 47% in 1995 to 38% in 1996. Thedecrease was primarily attributable to the Company's access to lower effective tax rates in the United Kingdom andSwitzerland through its sales subsidiaries in those jurisdictions, as well as to effects following the Company's April1996 reorganization in which QIAGEN N.V. was formed as a Dutch holding company, which contributed to a lowerover all tax rate.

Fiscal Years Ended December 31, 1995 and 1994

Net Sales. Net sales increased 53% (or $12.9 million) to $37.0 million in 1995 from $24.1 million in 1994. Net salesin the United States increased 34% (or $5.3 million) to $21.0 million, and net sales outside the United Statesincreased 90% (or $7.6 million) to $16.0 million. The overall increase in net sales was primarily attributable toincreased market penetration of QIAGEN's existing products. All of the Company's major products experienced sig-nificant sales growth from 1994 to 1995. In addition, in 1995 the Company introduced several new consumableproducts, and in the second half of the year, the Company introduced the BioRobot 9600 instrument. A material por-tion of the Company's sales continue to be attributable to the Company's range of products designed for plasmidDNA applications.

Gross Profit. The Company's gross profit increased from $16.8 million (70% of net sales) in 1994 to $27.4 million(74% of net sales) in 1995. The increase was primarily due to production efficiencies that resulted from increased unitvolume and the increased use of automated equipment. In 1995, the Company continued to invest in, and realizethe benefits of, the increased level of production automation through the purchase and installation of custom-engi-neered, modular production equipment. Gross profit margin was also positively affected by the establishment of salessubsidiaries in the United Kingdom and Switzerland, which commenced operations in August 1994 and January1995, respectively. This resulted in a shift to higher margin net sales by wholly owned subsidiaries from lower mar-gin net sales to distributors.

Research and Development. Research and development expenses increased 60% from $2.8 million (11% of net sales)in 1994 to $4.4 million (12% of net sales) in 1995. The increase resulted primarily from greater personnel expens-es, as the Company continued the expansion of its new product development capabilities. The Company has a strongcommitment to research and development and expects its expenses in this area to continue to increase significantly.

Sales and Marketing. Sales and marketing expenses increased 76% from $5.3 million (22% of net sales) in 1994 to$9.4 million (25% of net sales) in 1995. The increase was associated with increased volume of net sales, includingexpenditures for additional personnel, commissions, promotions, publications and advertising and the introduction ofthe BioRobot 9600. A portion of these expenses were incurred as a result of the establishment of marketing and salesactivities in the Company's United Kingdom and Swiss sales subsidiaries.

General and Administrative. General and administrative expenses increased 70% from $5.3 million (22% of net sales)in 1994 to $9.0 million (24% of net sales) in 1995. The increase was due to the expansion of the Company's admin-istrative infrastructure to accommodate sales growth. A significant portion of the increase, totalling approximately$1.0 million, was incurred in connection with the addition of the United Kingdom and Swiss sales subsidiaries.

21

22

Other Income (Expense). Other income (expense) decreased from a net expense of $525,000 in 1994 to a net expenseof $153,000 in 1995. The largest component of this decrease was attributable to research and development grantstotaling $790,000 received from German federal and state authorities and the European Community in 1995.QIAGEN's research and development activities are currently principally carried out in Germany, and the Companyexpects to continue to apply for such research and development grants in the future. Other income (expense) alsoincluded $310,000 and $560,000 in expenses in 1994 and 1995, respectively, from foreign currency transactions.This net expense results from conducting business in a currency other than the functional currency of the entity. TheCompany's reporting currency is the U.S. dollar. See Note 2(I) to Consolidated Financial Statements.

Provision for Income Taxes. The Company's effective tax rate decreased from 56% in 1994 to 47% in 1995. Thedecrease was primarily attributable to the Company's access to lower effective tax rates in the United Kingdom andSwitzerland through its sales subsidiaries in those jurisdictions.

Currency Hedging

In the normal course of business, the Company from time to time purchases exchange traded put options on U.S. dollarsto mitigate foreign currency exposure.

Liquidity and Capital Resources

To date, the Company has funded its business primarily through debt and the private and public sales of equity and,since 1993, through cash generated from operations. The Company generated net cash from operating activities ofapproximately $4.1 million and $3.9 million in 1996 and 1995, respectively. The Company's investing and financingactivities used $6.4 million during 1996 and used $2.8 million during 1995. Approximately $9.7 million of cashwas used by investing activities in 1996 for the purchases of fixed assets such as machinery for the Company'sproduction operations. In the same period, the Company generated cash from financing activities of approximately$31.9 million. This cash flow from financing is mainly due to the Company's initial public offering.

As of December 31, 1995 and 1996, the Company had cash and cash equivalents of approximately $5.3 millionand $2.0 million, respectively, and working capital of approximately $9.9 million and $35.8 million, respectively.As of December 31, 1996, the Company had marketable securities of approximately $28.0 million, which includesthe net proceeds from the Company’s initial public offering. The Company has credit lines totaling approximately $3.6million, none of which were utilized as of December 31, 1996. The Company also carries $1.3 million of long-termdebt at an interest rate subsidized by a German government-related institution. The Company believes that its sourcesof liquidity, together with the proceeds from its public and private sales of equity and the anticipated funds providedby operations, will be sufficient to finance its planned operations for at least the next two years.

Currency Fluctuations

The Company operates on a multinational basis and a significant portion of its business is conducted in currenciesother than the U.S. dollar, mainly the German mark. The Company has historically recorded a majority of its expensesin German marks, especially research and development expenses, with the substantial majority of its revenuesdenominated in U.S. dollars. Fluctuations in the value of the currencies in which the Company conducts its businessrelative to the U.S. dollar have caused and will continue to cause dollar-translated amounts to vary from one periodto another. Due to the number of currencies involved, the constantly changing currency exposures, and the substantialvolatility of currency exchange rates, the Company cannot predict the effect of exchange rate fluctuations upon futureoperating results. From time to time, the Company engages hedging transactions which include, but are not limited to,purchases of exchange traded put options on U.S. dollars to mitigate foreign currency exposure.

The functional currencies of the Company and its subsidiaries generally are their respective local currencies inaccordance with Statement of Financial Accounting Standard No. 52 "Foreign Currency Translation". All amounts inthe financial statements of entities whose functional currency is not the dollar are translated into dollar equivalents atexchange rates as follows: (1) assets and liabilities at period-end rates, (2) income statement accounts at weightedaverage exchange rates for the period and (3) components of shareholders' equity at historical rates. Translation gainsor losses are recorded in shareholders' equity and transaction gains and losses are reflected in net income (loss). Thenet exchange gain (loss) for 1994, 1995 and 1996, was ($310,000), ($560,000) and $993,000, respectively,which is included in other income (expense).

Business Factors

This report contains certain forward-looking statements that are subject to certain risks and uncertainties. These statementsinclude statements regarding (I) the Company’s ability to maintain its relationships with its customers and its broadrange of products, (II) the Company’s ability to stay abreast of technological developments, (III) the size of theCompany’s markets and potential markets, (IV) the Company’s ability to penetrate and expand these markets and thedemand for the Company’s products, (V) the Company’s ability to increase its production efficiency as a result ofexpansion in its production capacity, and (VI) the Company’s liquidity. Such statements are based on management’scurrent expectations and are subject to a number of factors and uncertainties that could cause actual results to differmaterially from those described in the forward-looking statements. The Company cautions investors that there can beno assurance that actual results or business conditions will not differ materially from those projected or suggested insuch forward-looking statements as a result of various factors, including, but not limited to, the following: risksassociated with the Company’s expansion of operations, management growth, international operations, anddependence on key personnel; intense competition; the variation in the Company’s operating results; technologicalchange; the Company’s ability to develop and protect proprietary products and technologies and to enter intocollaborative commercial relationships; the Company’s future capital requirements; and uncertainties as to the extentof future government regulation of the Company’s business. As a result, the Company’s future development effortsinvolve a high degree of risk. For further information, refer to the more specific risks and uncertainties discussedthroughout this Annual Report.

23

The accompanying notes are an integral part of these consolidated statements.

QIAGEN N.V.

CONSOLIDATED BALANCE SHEETS

December 31,

1996 1995

AssetsCurrent Assets:

Cash and cash equivalents $ 1,975,000 $ 5,305,000Marketable securities 28,097,000 –Accounts receivable, net of allowance of $390,000 and $284,000 in 1996 and1995, respectively 6,498,000 4,680,000Income taxes receivable 492,000 –Inventories 9,851,000 6,152,000Prepaid expenses and other 1,625,000 758,000Deferred income taxes 30,000 407,000

Total current assets 48,568,000 17,302,000Property, plant and equipment, net 16,115,000 8,756,000Intangible assets 938,000 –Other assets 569,000 145,000

Total assets $ 66,190,000 $ 26,203,000

24

QIAGEN N.V.

CONSOLIDATED BALANCE SHEETS

December 31,

1996 1995

Liabilities and Shareholders’ Equity

Current Liabilities:Short-term debt $ 1,820,000 $ –Current portion of long-term debt 449,000 319,000Current portion of capital lease obligations 904,000 868,000Accounts payable 5,552,000 2,919,000Accrued liabilities 3,475,000 1,755,000Income taxes payable 539,000 1,521,000

Total current liabilities 12,739,000 7,382,000

Long-Term Liabilities:Long term debt, net of current portion 891,000 1,276,000Capital lease obligations, net of current portion 4,771,000 5,248,000Other 93,000 89,000

Total long-term liabilities 5,755,000 6,613,000

Commitments and Contingencies (Note 12)Shareholders’ Equity:

Common shares, NLG .03 ($.0175) par value:Authorized--32,500,000 sharesIssued and outstanding--16,740,500 shares in 1996 and 12,876,667 shares in 1995 293,000 225,000Additional paid-in capital 40,643,000 7,502,000Retained earnings 7,795,000 2,465,000Notes receivable from sale of shares (1,729,000) –Cumulative translation adjustment 694,000 2,016,000

Total shareholders’ equity 47,696,000 12,208,000

$66,190,000 $26,203,000

25The accompanying notes are an integral part of these consolidated statements.

26 The accompanying notes are an integral part of these consolidated statements.

QIAGEN N.V.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31,

1996 1995 1994

Net Sales $ 54,157,000 $ 36,992,000 $ 24,115,000

Cost of Sales 14,669,000 9,550,000 7,288,000

Gross profit 39,488,000 27,442,000 16,827,000Operating Expenses:

Research and development 6,490,000 4,414,000 2,758,000Sales and marketing 16,034,000 9,369,000 5,323,000General and administrative 10,985,000 8,981,000 5,281,000

Total operating expenses 33,509,000 22,764,000 13,362,000

Income from operations 5,979,000 4,678,000 3,465,000

Other income (expense):Interest income 1,012,000 76,000 16,000Interest expense (574,000) (706,000) (726,000)Research and development grants 1,339,000 790,000 296,000Gain (loss) on foreign currency transactions 993,000 (560,000) (310,000)Other income (expense), net (88,000) 247,000 199,000

2,682,000 (153,000) (525,000)

Income before provision for income taxes 8,661,000 4,525,000 2,940,000Provision for income taxes 3,331,000 2,130,000 1,656,000

Net income $ 5,330,000 $ 2,395,000 $ 1,284,000

Net income per common share $ 0.35 $ 0.18 $ 0.10

Weighted average number of common shares 15,410,000 13,623,000 13,132,000

27The accompanying notes are an integral part of these consolidated statements.

QIAGEN N.V.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE YEARS ENDED DECEMBER 31, 1996

NotesAdditional Retained Receivable Cumulative

Common Shares Paid-In Earnings from Sale TranslationShares Amount Capital (Deficit) of Shares Adjustment Total

BALANCE ATDECEMBER 31,1993 12,140,000 $ 212,000 $ 6,266,000 $(1,214,000) $ – $ 421,000 $ 5,685,000

Issuance ofcommon shares 736,667 13,000 1,236,000 – – – 1,249,000

Net income – – – 1,284,000 – – 1,284,000Translation adjustment – – – – – 902,000 902,000

BALANCE AT DECEMBER 31,1994 12,876,667 225,000 7,502,000 70,000 – 1,323,000 9,120,000

Net income – – – 2,395,000 – – 2,395,000Translation adjustment – – – – – 693,000 693,000

BALANCE AT DECEMBER 31,1995 12,876,667 225,000 7,502,000 2,465,000 – 2,016,000 12,208,000

Issuance ofcommon shares 833,333 15,000 1,731,000 – (1,729,000) – 17,000

Initial public offering 3,016,500 53,000 31,027,000 – – – 31,080,000Shares issued

in exchangefor patents 14,000 – 383,000 – – – 383,000

Net Income – – – 5,330,000 – – 5,330,000Translation

adjustment – – – – – (1,322,000) (1,322,000)

BALANCE ATDECEMBER 31,1996 16,740,500 $ 293,000 $40,643,000 $ 7,795,000 $ (1,729,000) $ 694,000 $ 47,696,000

QIAGEN N.V.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31,

1996 1995 1994Cash Flows From Operating Activities

Net income $ 5,330,000 $ 2,395,000 $ 1,284,000Adjustments to reconcile net income to net cash

provided by operating activities:Depreciation and amortization 2,455,000 1,803,000 1,158,000Provision for losses on accounts receivable 108,000 142,000 140,000Deferred income taxes 412,000 349,000 1,264,000Loss on disposition of property and equipment 30,000 49,000 55,000

Decrease (increase) in:Accounts receivable (2,086,000) (1,745,000) (956,000)Inventories (4,160,000) (1,772,000) (656,000)Income taxes receivable (503,000) –Prepaid expenses and other (802,000) (260,000) 536,000Other assets (436,000) (103,000) (2,000)

Increase (decrease) in:Accounts payable 3,106,000 1,208,000 (244,000)Accrued liabilities 1,693,000 567,000 505,000Income taxes payable (1,012,000) 1,223,000 301,000

Net cash provided by operating activities 4,135,000 3,856,000 3,385,000

28 The accompanying notes are an integral part of these consolidated statements.

The accompanying notes are an integral part of these consolidated statements.

Years ended December 31,

1996 1995 1994

Cash Flows From Investing Activities:

Purchases of property and equipment (9,706,000) (1,706,000) (1,061,000)Proceeds from sale of property and equipment 5,000 80,000 203,000Purchases of intangibles assets (471,000) – –Purchases of marketable securities, net (28,097,000) – –

Net cash used in investing activities (38,269,000) (1,626,000) (858,000)

Cash Flows From Financing Activities:

Proceeds from short-term debt 1,820,000 – –Principal payments on capital leases (868,000) (878,000) (529,000)Proceeds from long-term debt 14,000 – 457,000Repayment of long-term debt (152,000) (320,000) (1,330,000)Issuance of common shares 31,097,000 – 1,249,000

Net cash provided by (used in) financing activities 31,911,000 (1,198,000) (153,000)

Effect of Exchange Rate Changes on Cash and Cash Equivalents (1,107,000) 661,000 792,000Net increase (decrease) in cash and cash equivalents (3,330,000) 1,693,000 3,166,000

Cash and Cash Equivalents, beginning of year 5,305,000 3,612,000 446,000

Cash and Cash Equivalents, end of year $ 1,975,000 $ 5,305,000 $ 3,612,000

29

QIAGEN N.V.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996

1. Line of Business

QIAGEN N.V. (the Company) and subsidiaries produce and distribute biotechnology products, primarily for theseparation and purification of nucleic acids (DNA/RNA). The Company also assembles and distributes certain roboticequipment to be used in connection with the Company’s products. The Company’s products are used in biologicalresearch by universities and research institutions as well as in genome sequencing, diagnostic and therapeutic industries.At December 31, 1996, the Company consists of the Netherlands parent company and its wholly owned subsidiaries,QIAGEN GmbH in Hilden, Germany; QIAGEN Inc. in Los Angeles, United States; QIAGEN Ltd. in Crawley, England;QIAGEN AG in Basel, Switzerland; QIAGEN S.A. in Courtaboeuf Cedex, France; and QIAGEN Pty Ltd in CliftonHill, Australia.

Prior to April 29, 1996, the Company operated as QIAGEN GmbH with subsidiaries QIAGEN Inc., QIAGEN Ltd.(since 1994) and QIAGEN AG (since 1994). On April 29, 1996, QIAGEN N.V. acquired all of the outstandingshares of QIAGEN GmbH in exchange for 41,130,000 newly issued shares of QIAGEN N.V. which continues asthe parent of QIAGEN GmbH. In June 1996, the Company effected a reverse stock split of 1:3 shares, resulting in13,710,000 shares outstanding with a par value NLG .03 per share. The effect of the reincorporation and relatedstock split has been retroactively reflected in the accompanying financial statements for all periods presented.

The Company’s products are sold throughout the world, primarily in the United States and in Europe. Similar to mostcompanies in this line of business, the Company’s products are subject to rapid technological change. Because oftechnological changes, the Company needs to continuously expend resources toward research and development.

2. Summary of Significant Accounting Policies

a.Principles of Consolidation

The accompanying consolidated financial statements were prepared in conformity with United States generallyaccepted accounting principles and include the accounts of the Company and its subsidiaries, after elimination of allsignificant intercompany accounts and transactions. The present consolidated statements were prepared for Securitiesand Exchange Commission filing purposes and do not contain complete information related to the Company’s statu-tory accounts, which must be adopted at the Annual General Meeting of shareholders pursuant to Dutch law.

b.Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with United States generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assets, liabilities anddisclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.

c. Net Income per Common Share

Net income per common share for each of the three years ended December 31, 1996 is based on the weighted averagenumber of common shares outstanding. For all periods presented, per share information was computed pursuant tothe rules of the Securities and Exchange Commission (SEC), which require that common stock issued by the Companyduring the twelve months immediately preceding the Company’s initial public offering plus the number of commonshares issuable pursuant to the grant of options issued during the same period, be included in the calculation of theshares outstanding using the treasury stock method from the beginning of all periods presented.

30

The following schedule summarizes the information used to compute earnings per common share:

Years ended December 31,

1996 1995 1994Net income $ 5,330,000 $ 2,395,000 $ 1,284,000Weighted average common shares outstanding 15,222,000 13,565,000 13,074,000Dilutive effect of stock options pursuant to SEC Rules 188,000 58,000 58,000Weighted average common shares used to

compute earnings per share 15,410,000 13,623,000 13,132,000Net income per common share $ 0.35 $ 0.18 $ 0.10

d.Credit Risk

The Company’s accounts receivable are unsecured and the Company is at risk to the extent such amounts becomeuncollectible. As of December 31, 1996 and 1995, no single customer represented more than 10 percent of accountsreceivable. For the years ended December 31, 1996, 1995 and 1994, no single customer represented more than10 percent of consolidated net sales.

e. Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and consist of materials, labor and overhead.

f. Property, Plant and Equipment

Depreciation is computed using the straight-line and declining balance methods over the following estimated usefullives: buildings for 25 years; machinery and equipment for three to eight years; computer software for one to fiveyears; furniture and office equipment for three to five years; and leasehold improvements are computed on a straight-line method over the lesser of the life of the lease or the estimated useful life.

The Company follows the policy of capitalizing expenditures that materially increase asset lives and charging ordinarymaintenance and repairs to operations as incurred. When property or equipment are disposed of, the cost and relatedaccumulated depreciation and amortization are removed from the accounts and any gain or loss is included inoperations. Repairs and maintenance expense was $469,000, $266,000 and $172,000 in fiscal years 1996,1995 and 1994, respectively.

g.Revenue Recognition

The Company recognizes product revenue when products are shipped, except that revenue from instrumentationequipment is not recognized until customer acceptance. Revenue from services is recognized when the related service is performed.

h.Statements of Cash Flows

During fiscal years 1996, 1995 and 1994, the Company acquired property and equipment with a cost of$797,000, $1,155,000 and $1,060,000, respectively, through lease financing agreements. During 1996, theCompany issued 14,000 common shares at a fair market value of $383,000 for patents and related rights. Thesenon-cash transactions are excluded from the statements of cash flows.

Cash paid for interest was $769,000, $1,046,000 and $953,000 in 1996, 1995 and 1994, respectively. Cash paid for income taxes was $4,496,000, $599,000 and $117,000 in 1996, 1995 and 1994, respectively.

The Company considers all short-term investments with original maturities of three months or less to be cash equivalents.

31

i. Foreign Currency Translation

The Company's reporting currency is the United States dollar. The subsidiaries' functional currencies are the Germanmark, the United States dollar, the British pound, the Swiss franc, the French franc and the Australian dollar.

Balance sheets prepared in a currency other than the functional currency are restated to the functional currency usingthe year-end exchange rates, except for prepayments, property, other long-term assets and shareholders' equityaccounts, which are restated at rates in effect when these assets were acquired. Revenues and expenses are restatedat average rates during the year except for depreciation and amortization, which are translated at the historical rates.

Balance sheets prepared in their functional currency are translated to the reporting currency, the United States dollar,at exchange rates in effect at the end of the accounting period. Revenue and expense accounts are translated at aweighted average of exchange rates during the period. The cumulative effect of translation is a component ofshareholders’ equity.

The Company entered into certain foreign currency exchange contracts during 1996 and 1995 to hedge againstforeign currency fluctuations. The Company incurred commissions relating to these contracts of approximately$145,000 and $120,000 during 1996 and 1995, respectively.

In February 1997, the Company entered into a $16 million foreign currency contract to hedge an inter-company loan.

j. Warranty

The Company warrants its products against defects in materials and workmanship for a period of one year. A provision for estimated future warranty is recorded when products are shipped.

k. Fair Value of Financial Instruments

The carrying value of the Company’s cash, receivables, trade payables and accrued liabilities approximate their fairvalues because of the short maturities of those instruments. The carrying value of the Company’s debt and capital leasesapproximate their fair values because of the short maturities and/or interest rates which are comparable to thoseavailable to the Company on similar terms.

l. Authoritative Pronouncements

In March 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial AccountingStandards (SFAS) No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be DisposedOf,” which requires impairment losses to be recorded on long-lived assets used in operations when indications ofimpairment are present and the undiscounted cash flows estimated to be generated by those assets are less than theassets’ carrying amount. The Company adopted SFAS 121 in the first quarter of 1996 and the impact on theCompany’s financial position and results of operations was insignificant.

In October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based Compensation”. SFAS 123 encourages,but does not require, a fair value based method of accounting for employee stock options or similar equity instruments.It also allows an entity to elect to continue to measure compensation cost for employee options under AccountingPrinciples Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” but requires pro forma disclosureof net income and earnings per share as if the fair value based method had been applied. The Company has chosento elect this disclosure method and to continue to measure compensation cost under APB 25. Therefore, SFAS 123had no impact on the Company’s financial position or results of operations.

32

3. Marketable Securities

Marketable securities consist of commercial paper and other interest bearing securities with original maturities inexcess of three months. The Company accounts for these temporary investments in accordance with SFAS No. 115“Accounting for Certain Investments in Debt and Equity Securities.” At December 31, 1996, the fair market value oftemporary investments, classified as “available for sale securities,” approximated cost, thus no unrealized holdinggains or losses were reported in the accompanying balance sheets. During fiscal year 1996, the Company realizedgains from the sale of securities in the amount of approximately $1,000.

On December 3, 1996, the Company purchased foreign currency contracts to hedge transactions denominated inUnited States Dollars ($6 million). The contracts expire at various dates through June 30, 1997. The value of thesecontracts at December 31, 1996 amounted to DM 28,500 ($16,440) and is included in marketable securities in theaccompanying balance sheet.

4. Inventories

The components of inventories consist of the following as of December 31, 1996 and 1995:

1996 1995

Raw materials $ 2,973,000 $ 2,243,000Work in process 2,601,000 1,459,000Finished goods 4,277,000 2,450,000

$ 9,851,000 $ 6,152,000

5. Property, Plant and Equipment

Property, plant and equipment are stated at cost and are summarized as follows as of December 31, 1996 and 1995:

1996 1995

Land and buildings $ 5,652,000 $ 5,125,000Machinery and equipment 6,533,000 5,665,000Computer software 2,517,000 1,027,000Furniture and office equipment 6,434,000 2,920,000Leasehold improvements 1,447,000 137,000Construction in progress 1,079,000 12,000

23,662,000 14,886,000

Less: Accumulated depreciation and amortization (7,547,000) (6,130,000)

$ 16,115,000 $ 8,756,000

6. Intangible Assets

On November 1, 1996, the Company entered into an agreement with a research corporation and an individual topurchase certain patents, trademarks and licensing rights for $100,000 cash and 14,000 shares of common stock,valued at $383,000.

During 1996, the Company also purchased rights from a University for certain patents in the amount of approximately$500,000. All patents and related rights are amortized over 5 years. The Company recognized amortizationexpense relating to these agreements of $15,000 for the year ended December 31, 1996.

33

7. Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109. Under SFAS 109, deferred income taxassets or liabilities are computed based on the temporary difference between the financial statement and income taxbases of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differencesare expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred incometax assets or liabilities from period to period.

The Company has recorded a gross deferred tax asset of $726,000 at December 31, 1996. Realization isdependent on generating sufficient taxable income in the future. Although realization is not assured, managementbelieves it is more likely than not that all of the deferred tax asset will be realized.

The components of the net deferred tax assets at December 31, 1996 and 1995 are as follows:

1996 1995Deferred tax asset:

Allowance for bad debts $ 121,000 $ 92,000Vacation accrual 74,000 44,000Warranty accrual 56,000 15,000Net operating loss carryforward 139,000 –Inventory – 195,000United States state income taxes 129,000 47,000Capital lease 158,000 –Other 49,000 61,000

726,000 454,000

Deferred tax liability:Depreciation (120,000) (47,000)Inventory (30,000) –

Intangibles (546,000) –

(696,000) (47,000)

Net deferred tax asset $ 30,000 $ 407,000

The provision for income taxes for the years ended December 31, 1996, 1995 and 1994 are as follows:

1996 1995 1994Current - United States federal taxes $ 1,378,000 $ 545,000 $ 305,000

- United States state taxes 380,000 159,000 85,000- Non-United States taxes 1,209,000 1,080,000 –

2,967,000 1,784,000 390,000

Deferred - United States federal taxes (13,000) (131,000) (20,000)- United States state taxes 29,000 29,000 1,000- Non-United States taxes 348,000 448,000 1,285,000

364,000 346,000 1,266,000

Provision for income taxes $ 3,331,000 $2,130,000 $1,656,000

34

Differences between the provision for income taxes and income taxes at the United States statutory federal income taxrate for the years ended December 31, 1996, 1995 and 1994 are as follows:

1996 1995 1994Amount Percent Amount Percent Amount Percent

Income taxes at United States statutory federal rate $ 2,945,000 34.0% $ 1,539,000 34.0% $ 1,000,000 34.0%

United States state income taxes, net of federal income tax effect 263,000 3.0% 87,000 1.9% 53,000 1.8%

Non-United States taxes at rates greater than United States statutory federal rate 80,000 0.9% 477,000 10.6% 580,000 19.7%

Other items, net, none of which individually exceed 5 percent of federal taxes at statutory rate 43,000 0.5% 27,000 0.6% 23,000 0.8%

$ 3,331,000 38.5% $ 2,130,000 47.1% $ 1,656,000 56.3%

8. Accrued Liabilities

Accrued liabilities at December 31, 1996 and 1995 consist of the following:

1996 1995

Payroll and related $ 1,167,000 $ 531,000Management bonuses 318,000 240,000Warranty 347,000 237,000Professional services 607,000 112,000Sales and other taxes 123,000 114,000Royalties 117,000 95,000

Other 796,000 426,000

$ 3,475,000 $ 1,755,000

9. Debt

The Company has three separate lines of credits amounting to DM 5,500,000 (approximately $3.6 million) withinterest rates ranging from 7 percent to 8.5 percent. These lines of credit may be called without notice. No amounts wereoutstanding under these credit facilities at December 31, 1996 or 1995.

Short term debt at December 31, 1996 consists of a three day margin loan at an interest rate of approximately 5 percent, secured by marketable securities, which matured on January 2, 1997.

Long-term debt consists of a note payable for $1,340,000 which is secured by technical and other equipment. The note bears interest at 6.75 percent and is due in semi-annual payments of $148,000, with a final payment due inDecember 2000. One major shareholder has guaranteed approximately $325,000 of the loan.

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Future principal maturities of long-term debt as of December 31, 1996 are as follows:

Year ending December 31,

1997 $ 449,0001998 297,0001999 297,0002000 297,000

$ 1,340,000

10. Business Segments

A summary of net sales, pre-tax income and identifiable assets for the Company’s operations is as follows:1996 1995 1994

Sales:United States $ 31,543,000 $ 20,972,000 $ 15,702,000Germany 34,955,000 24,221,000 16,818,000Other European Countries 8,190,000 5,032,000 767,000Australia 260,000 – –Sub-total 74,948,000 50,225,000 33,287,000Eliminations (20,791,000) (13,233,000) (9,172,000)

Total $ 54,157,000 $ 36,992,000 $ 24,115,000

Pre-tax income (loss):The Netherlands $ 1,195,000 $ – $ –United States 4,315,000 1,419,000 869,000Germany 19,736,000 2,115,000 2,726,000Other European Countries 913,000 824,000 (117,000)Australia (86,000) – –Sub-total 26,073,000 4,358,000 3,478,000Eliminations (17,412,000) 167,000 (538,000)

Total $ 8,661,000 $ 4,525,000 $ 2,940,000Identifiable Assets:

The Netherlands $ 49,768,000 $ – $ –United States 13,586,000 7,448,000 6,235,000Germany 42,096,000 22,635,000 17,947,000Other European Countries 4,305,000 1,828,000 792,000Australia 343,000 – –Sub-total 110,098,000 31,911,000 24,974,000Eliminations (43,908,000) (5,708,000) (5,524,000)

Total $ 66,190,000 $ 26,203,000 $ 19,450,000

European sales includes sales to European distributors which are sold in countries other than Europe. United States salesinclude limited sales to customers in Canada and Mexico. The eliminations represent intercompany sales and investments,advances, interest charges, management fees and intercompany profit.

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11. Stock Options

On April 30, 1996, the Company adopted the QIAGEN N.V. 1996 Employee, Director and Consultant Stock OptionPlan (the Option Plan). The Option Plan allows for incentive stock options as well as for non-qualified options with aterm of generally 10 years, subject to earlier termination in certain situations. The exercise price of the options isdetermined by the Board or the Compensation Committee, but in the case of an incentive stock option, the exerciseprice may not be less than 100 percent of the fair market value at the date of grant. The Company has reserved1,371,000 shares of common stock for issuance under this plan. During 1996, the Company granted options topurchase 378,350 common shares. These options vest over a period of three years and have exercise prices rangingfrom $9.50 to $25.75.

During January and February 1997, the Company granted another 72,400 options to purchase common shares atexercise prices of $25.125 and $25.75.

Information regarding the Company’s Option Plan as of December 31, 1996, and changes during the year thenended is summarized as follows:

Weighted AverageShares Exercise Price

December 31, 1995 – $ –Granted 378,350 12.22Exercised – –Forfeited 550 14.00

December 31, 1996 377,800 $ 12.22

The options outstanding at December 31, 1996 expire in the year 2006. None of the options were exercisable atDecember 31, 1996. The weighted average fair value of options granted during 1996 was $6.94. The fair value ofeach option grant is estimated on the date of grant using the Black-Scholes option pricing model with the followingassumptions used for grants: risk-free interest rates of 6.35, 6.66 and 5.99 percent; expected lives of 7 years; expectedvolatility of 45 percent and no dividends would be issued during the option terms.

Information about stock options outstanding at December 31, 1996 is summarized as follows:

Options OutstandingWeighted WeightedAverage Average

Number Remaining ExerciseExercise Price Outstanding Contract Life Price$ 9.50 279,900 9.3 Years $ 9.50$ 14.00 47,950 9.5 Years $ 14.00$ 25.75 49,950 10.0 Years $ 25.75

377,800 9.4 Years $ 12.22

The Company accounts for its stock option plan under Accounting Principles Board Opinion No. 25, “Accounting forStock Issued to Employees,” under which no compensation cost has been recognized. Had compensation cost for theCompany’s stock option plans been determined consistent with SFAS No. 123, “Accounting for Stock-BasedCompensation,” the Company’s net income and earnings per share would have been reduced to the following proforma amounts at December 31, 1996:

Net Income As Reported $ 5,330,000Pro Forma $ 5,102,000

Net Income per share As Reported $ 0.35Pro Forma $ 0.33

Because the Company had no options outstanding prior to 1996, the resulting compensation cost may not berepresentative of that to be expected in future years.

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The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options whichhave no vesting restrictions and are fully transferable. Option value models also require the input of highly subjectiveassumptions such as expected option life and expected stock price volatility. Because the Company’s stock-basedcompensation plans have characteristics significantly different from those of traded options and because changes in thesubjective input assumptions can materially affect the fair value estimate, the Company believes that the existing optionvaluation models do not necessarily provide a reliable single measure of the fair value of awards from those plans.

12. Commitments and Contingencies

a. Lease Commitments

The Company leases facilities and equipment under operating lease arrangements expiring in various years through2007. Certain facility and equipment leases constitute capital leases. The accompanying consolidated financialstatements include the assets and liabilities arising from these capital lease obligations.

Minimum future obligations under capital and operating leases at December 31, 1996 are as follows:

Capital Leases Operating Leases1997 $ 1,302,000 $ 2,289,0001998 1,196,000 2,068,0001999 933,000 1,631,0002000 500,000 960,0002001 487,000 550,000Thereafter 6,384,000 1,478,000

10,802,000 $ 8,976,000Less: Amount representing interest (5,127,000)

5,675,000Less: Current portion (904,000)

$ 4,771,000

Rent expense under noncancelable operating lease agreements was $2,019,000, $608,000 and $535,000 for theyears ended December 31, 1996, 1995 and 1994, respectively.

b. Purchase Commitments

At December 31, 1996, the Company had commitments with one vendor to purchase certain products during 1997at a total cost of approximately $2 million.

c. Contingencies

The Company is a party to legal proceedings incidental to its business. Certain claims, suits or complaints arising outof the normal course of business have been filed or were pending against the Company. Although it is not possibleto predict the outcome of such litigation, based on the facts known to the Company and after consultation with counsel,management believes that such litigation will not have a material adverse effect on its financial position or results ofoperations.

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13. Retirement Plans

In September 1992, QIAGEN Inc. adopted the Employees 401(k) Savings Plan (the Plan). The purpose of the Plan isto provide retirement benefits to all eligible employees of the subsidiary. QIAGEN Inc. may make a matchingcontribution to the Plan at the discretion of the Board of Directors and can make a profit sharing contribution to the Planat the Board’s discretion. In 1996 and 1995, the Company’s total contribution to the Plan was approximately $83,000and $45,000, respectively. The Company made no contribution to the Plan during 1994.

QIAGEN GmbH has a deferred compensation plan for one officer. The present value of the future compensationobligation of $93,000 and $89,000 has been accrued in the accompanying consolidated financial statements atDecember 31, 1996 and 1995, respectively.

14. Equity Transactions

a.Stock Issuance

Prior to the initial public offering, the Company issued 25,000 (833,333 after reincorporation) shares of commonstock to certain existing shareholders including certain executive officers for $1,746,000. Cash of $17,000 was paidand the balance was financed through notes receivables, which are reflected as a reduction of equity in the balancesheet at December 31, 1997.

In November 1996, the Company issued 14,000 shares in connection with the purchase of patents and related rights(see Note 6).

b.Initial Public Offering

In June 1996, the Company completed an initial public offering of its common stock. The Company sold 2,514,000shares at a price of $12.00 per share. In connection with this offering, the Company granted the underwriters anoption for 30 days to purchase an additional 502,500 shares. These shares were purchased by the underwriters inJuly 1996. The gross proceeds of the initial public offering were $36,198,000. This amount, net of underwritingcommissions and other costs totaling $5,118,000, was recorded in common stock and capital in excess of par valuein the accompanying financial statements.

c. Restructuring

On July 30, 1996, QIAGEN N.V. purchased the subsidiaries of QIAGEN GmbH for DM 24,401,000. Thosesubsidiaries of QIAGEN GmbH were QIAGEN Inc., QIAGEN AG and QIAGEN Ltd. A gain of DM 24,003,000was recognized by QIAGEN GmbH on the sale which is eliminated in consolidation.

15. Licensing Agreements

The Company has licensing agreements with two companies requiring certain up-front royalties and royalty paymentson net product sales ranging from 3 to 10 percent of covered products. The accompanying consolidated financialstatements include accrued royalties relating to these agreements in the amount of $117,000 and $95,000 atDecember 31, 1996 and 1995, respectively. Royalty expense relating to these agreements amounted to $261,000,$95,000 and $52,000 for the years ended December 31, 1996, 1995 and 1994, respectively. These agreementsalso have minimum raw material purchase requirements (see Note 12).

16. New Authoritative Pronouncements

Subsequent to year-end, the Financial Accounting Standards Board introduced SFAS No. 128 “Earnings per Share”and SFAS No. 129 “Disclosure of Information About Capital Structure”. SFAS No. 128 revises and simplifies thecomputation of earnings per share and requires certain additional disclosures. SFAS No. 129 requires additionaldisclosure regarding the Company’s capital structure. Both standards will be adopted in the fourth quarter of fiscal 1997.Management does not expect the adoption of these standards to have a material effect on the Company’s financialposition or results of operations.

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of QIAGEN N.V.:

We have audited the accompanying consolidated balance sheets of QIAGEN N.V. (a Netherlands company)

and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income,

shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996.

These financial statements are the responsibility of the Company's management. Our responsibility is to

express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as evaluating the over-

all financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial

position of QIAGEN N.V. and subsidiaries as of December 31, 1996 and 1995, and the results of their

operations and their cash flows for each of the three years in the period ended December 31, 1996 in

conformity with generally accepted accounting principles.

(signature)

ARTHUR ANDERSEN LLP

Los Angeles, California

February 24, 1997

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EXECUTIVE OFFICERS AND SUPERVISORY DIRECTORSThe supervisory directors, managing director and executive officers of the Company are as follows:

(1) Member of the Compensation Committee.(2) Member of the Audit Committee.

Market Information

The Company's common stock has been traded on The Nasdaq Stock Market under the symbol QGENF since June 28, 1996.Prior to June 28, 1996, the Company’s common stock was not publicly traded. The following table sets forth for the periods indicated the high and low sales price per share of the common stock as reported by The Nasdaq Stock Market.

1996: High LowSecond Quarter (from June 28, 1996) 15.125 15.125Third Quarter 30.750 15.000Fourth Quarter 31.250 23.625

1997:First Quarter 37.125 24.250

On March 14th, 1997, the last sale price for the Common Shares on The Nasdaq Stock Market was $33.250 per share.As of January 31st, 1997, there were approximately 1,550 shareholders of record of the Company's common stock.The Company has not paid any dividends on its common stock since its inception and the Supervisory Board has indicated in various filings with the United States Securities and Exchange Commission that it does not intend to payany dividends on its common stock in the foreseeable future. The Company intends to retain its earnings, if any, for thedevelopment of its business.

Executive Officers

Dr. Metin ColpanManaging Director, Chief Executive Officer

Peer M. SchatzChief Financial Officer

Chairman of the Supervisory Board

Professor Dr. jur. Carsten P. Claussen(1) is a partner inthe law firm of Hoffmann Liebs and Partner. He is aChairman of the Board of Deinhard & Co. K.G. andGermania Epe AG and is a member of other boards.

Supervisor Directors

Peter Kaleschke(1)(2) is a Managing Partner of TVMTechno Venture Management.

Martijn Kleijwegt(1)(2) is a general partner ofEuroventures Benelux.

Professor Dr. Detlev H. Riesner is Vice President ofResearch at the University of Düsseldorf, Germany.

Jochen Walter(2) is Managing Director of RBS GmbH& Co. KG the management company for S-Kapitalbeteiligungsgesellschaft Düsseldorf GmbH.

Dr. Franz A. Wirtz is Executive Director (Partner) ofGrünenthal GmbH.

SEC Form 20-F

A copy of the Company’s Annual Report on Form 20-Ffiled with the United States Securities and ExchangeCommission is available without charge upon writtenrequest to:

Corporate ControllerQIAGEN N.V.Spoorstraat 505911 KJ VenloThe NetherlandsPhone (+31)-77-320-8400Fax (+31)-77-320-8409

Dutch Annual Accounts

This Annual Report does not contain complete informationrelated to the company’s statutory accounts, which mustbe adopted at the Annual General Meeting of shareholderspursuant to Dutch law.A copy of the Dutch statutory accounts can be obtainedfree of charge by contacting:

Corporate ControllerQIAGEN N.V.Spoorstraat 505911 KJ VenloThe NetherlandsPhone (+31)-77-320-8400Fax (+31)-77-320-8409

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Corporate Headquarters

QIAGEN N.V.Spoorstraat 505911 KJ VenloThe NetherlandsPhone (+31)-77-320-8400Fax (+31)-77-320-8409

Independent Auditors

Arthur Andersen LLP633 West Fifth StreetLos Angeles, CA 90071

Counsel

MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO PC

One Financial CenterBoston, MA 02111

Registrar and Transfer Agent

American Stock Transfer & Trust Company40 Wall StreetNew York, NY 10005Phone (212)-936-5100

Stockholder Inquiries

Communications concerning transfer requirements, lostcertificates, and change of address should be directed tothe transfer agent. All other inquiries should be directed to:Investor RelationsQIAGEN N.V.Spoorstraat 505911 KJ VenloThe NetherlandsPhone (+31)-77-320-8400Fax (+31)-77-320-8409

Annual Meeting

The Annual General Meeting of Stockholders will be held onWednesday, June 25, 1997 at 3:00 PM at the offices of:De Brauw Blackstone WestbroekAdvocaten & Notarissen"Tripolis 300"Burgerweeshuispad 3011076 HR AmsterdamThe Netherlands

QIAGEN Around the World

The NetherlandsQIAGEN N.V.Spoorstraat 50 • 5911 KJ VenloPhone (+31)-77-320-8400 • Fax (+31)-77-320-8409

GermanyQIAGEN GmbHMax-Volmer-Straße 4 • 40724 HildenPhone (+49)-2103-892-703 • Fax (+49)-2103-892-777e-mail: qiagen@qiagen.com

USA & CanadaQIAGEN Inc.28159 Avenue Stanford • Valencia • CA 91355Phone (+1)-800-426-8157 • Fax (+1)-800-718-2056

FranceQIAGEN S.A.3 avenue du Canada • LP 809 • 91974 Courtaboeuf CedexPhone (+33)-1-60-920-920 • Fax (+33)-1-60-920-925

SwitzerlandQIAGEN AGAuf dem Wolf 39 • 4052 BaselPhone (+41)-61-319-30-30 • Fax (+41)-61-319-30-33

United KingdomQIAGEN Ltd.Boundary Court • Gatwick Road • CrawleyWest Sussex, RH10 2AXPhone (+44)-1293-422-900 • Fax (+44)-1293-422-922

AustraliaQIAGEN Pty LtdPO Box 25 • Clifton Hill • Victoria 3068Phone (+61)-3-9489-3666 • Fax (+61)-3-9489-3888

QIAGEN on the InternetHomepage: http://www.qiagen.come-mail: qiagen@qiagen.de

STOCKHOLDER INFORMATION

© 1997 QIAGEN. Patented or patent-pending technology and/or registered or registration-pending trademark of QIAGEN: QIAGEN®, QIAamp®, QIAprep®, QIAwell®, BioRobot™, RNeasy®, SuperFect™

The PCR process is covered by U.S. Patents 4,683,195 and 4,683,202 and foreign equivalents owned by Hoffmann-La Roche AG.